France orders trains to save Belfort plant

Posted on October 4, 2016

An Altsom's worker wearing a sticker reading 'No to closure' and holding a CGT French union flag demonstrates in front of the Prefecture on October 4, 2016 in Belfort, eastern France as French secretary of State and officials gathered to to discuss a plan to save a locomotive factory threatened with closure. French train-building giant Alstom had announced it would close the plant due to a lack of orders and move production to a site 200 kilometres (120 miles) to the north. Belfort's history is intertwined with that of Alstom, which produced its first steam train there in 1880. The plant now assembles high-speed TGV train locomotives. / AFP / Sebastien Bozon (Photo credit should read SEBASTIEN BOZON/AFP/Getty Images)©AFP

Alstom workers in Belfort, eastern France, protest against the factory’s closure on Tuesday

France’s government has intervened to prevent the closure of an Alstom train-making plant by placing a €600m order for equipment it does not immediately need.

Six months before presidential elections, the plan to protect the historic factory at Belfort highlights François Hollande’s determination to avoid an outcome that would have tainted his pro-business agenda and reignited criticism from his own Socialist party that €40bn of tax breaks he has given to business have not translated into jobs.

    The French state, which owns 20 per cent of Alstom, has agreed to push forward the purchase of high-speed trains to ensure the viability of the 137-year-old plant for the next four to five years and the retention of 480 jobs, Christophe Sirugue, industry minister, said on Tuesday.

    “We have chosen to roll up our sleeves and listen to the distress calls of local politicians and unions,” Mr Sirugue said. Some €70m will be invested in the plant to diversify its activities.

    The new work for Belfort includes the power units for an extra 15 TGV high-speed trains that are due to operate on new lines still under construction, meaning the trains will initially run on slower parts of the French rail network.

    Shutting down Belfort would have been seen as another sign of the president’s helplessness to prevent job losses — even when the state is a shareholder of the company involved — and to curb unemployment of nearly 10 per cent of the workforce.

    “Doing nothing wasn’t an option given the weight of Belfort in the French collective psyche,” said Jérôme Fourquet, head of political surveys at Ifop, a pollster. “Especially at a time when Hollande needs to win back working-class voters.”

    The plant in eastern France has long been regarded as a symbol of the country’s industrial prowess. It produced its first steam locomotive in the 1880s and manufactured the train à grande vitesse — TGV — that helped France pioneer high-speed rail travel in Europe.

    However, Alstom said last month it planned to shut down Belfort and move production to its plant in Reichshoffen, Alsace, after poor demand led to a 30 per cent fall in output at its French sites.

    Belfort’s last-minute reprieve is a reminder of the fragile state of France’s industry, which is only now showing small signs of recovery after bleeding jobs since the financial crisis.

    French industrial plants produce the same kind of products as Spanish plants but are 20 per cent more expensive

    – Patrick Artus, chief economist at investment bank Natixis

    Plant shutdowns in the eurozone’s second-largest economy have outnumbered openings by 605 since 2009, according to data compiled by Trendeo, a Paris-based consulting firm. In the past six months, new plants have marginally outnumbered closures, but with fewer jobs.

    High labour costs and weak investment in automation and research and development have steadily eroded French competitiveness, according to economists. Mr Hollande’s €40bn of fiscal incentives for companies has so far failed to reverse the trend.

    “French industrial plants produce the same kind of products as Spanish plants but are 20 per cent more expensive,” Patrick Artus, chief economist at the investment bank Natixis, said. “French companies’ margins have improved but the products are the same. Businesses have not invested in technology and have not moved upscale in terms of quality or product sophistication. This means a slow, inevitable deindustrialisation.”

    The state’s order placed with Alstom is unlikely to change these structural faults, Mr Artus noted. “The Russians make good freight cars cheaper,” he said.

    Unions have for years feared that Belfort could close and their worries intensified in 2014 after Alstom, which was bailed out by the state in 2004, sold its turbine manufacturing activities in the same town to General Electric in a €9.7bn deal.

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    A picture taken with a tilt and shift lens shows people walking by the Grande Arche (Great Arch) in the business district of La Defense, outside Paris on March 15, 2013. AFP PHOTO / FRED DUFOUR (Photo credit should read FRED DUFOUR/AFP/Getty Images)

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    This year Alstom missed out on a contract to build 44 trains when Akiem, a joint venture between the state-owned railway operator SNCF and Deutsche Bank, awarded the deal to German company Vossloh. Local politicians called on the government to overturn that decision.

    The French government has representatives on Alstom’s board but claimed the company’s plan to shut the plant had come as a surprise. Mr Sirugue described Alstom’s decision as “brutal” and done “without due consultation”.

    Michel Sapin, finance and economy minister, said Mr Hollande had “given us a target: to make sure that Alstom’s railway activities are maintained”.

    As presidential elections approach, Mr Hollande is struggling to fend off a threat from the far-right National Front. The anti-Brussels, anti-immigration party has sought to attract working class voters from the left — a strategy many analysts predict will allow Marine Le Pen, its leader, to qualify for the presidential run-off in May.

    The similarly symbolic Hayange steel furnaces closed in the early days of Mr Hollande’s presidency in 2013, after which the FN took control of the local town council. In Belfort, too, the FN has recorded steady electoral gains, coming first in the first round of regional elections last year.

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